Retail and Fast Fashion: The Immediate Toll of Tariffs on Cross-Border E-Commerce

The Price Tag of Fashion: Shein, Temu, and the ‘Low-Cost’ Business Model Under Siege

The fast fashion industry, particularly e-commerce-driven platforms such as Shein and Temu, has emerged as an early casualty in the tariff war. For years, these platforms have relied on the ability to ship low-cost goods from China to the United States with minimal duty impositions, thanks in part to the $800 de minimis exemption that allowed small shipments to bypass import taxes. However, the recent tariff expansion by the Biden administration has scrapped this exemption for goods imported from China, resulting in a sharp increase in the cost base for these companies.

For Shein and Temu, whose entire business models are built on affordability, this change has sent shockwaves through their pricing structures. Analysts have predicted that the average consumer price for a Shein item — which typically costs between $10 and $50 — could increase by as much as 30% in the next few months, further straining the company’s value proposition. While large multinational retailers such as Walmart and Amazon may be able to absorb some of the additional costs through economies of scale and diversified supplier bases, smaller players operating at the low end of the market have far fewer options.

“For companies like Shein, where margin compression is already a problem, these tariffs are a game-changer,” said Andrew Tsai, a consumer sector analyst at Citi Research. “They don’t have the luxury of absorbing cost increases without affecting their pricing strategy. And if prices go up, consumers might look elsewhere.”

For U.S.-based consumers, the immediate impact is evident — from delays in shipping times to higher prices on everyday items. Moreover, many of these platforms, which source their goods from Chinese factories, may face the additional logistical challenges of having to reroute shipments through third-party countries, driving up shipping costs even further. Countries such as Vietnam, Bangladesh, and Indonesia might become primary alternatives, but many of these nations are not equipped to handle the sheer scale of demand that platforms like Shein and Temu have come to rely on.

Retail Giants Feel the Pressure: Restructuring Sourcing and Logistics

Retailers who have traditionally relied on Asian manufacturers for low-cost, high-turnover goods are now scrambling to restructure their global sourcing models. Walmart, Target, and Macy’s — all of which source significant portions of their inventory from Asia — are working with their suppliers to assess whether shifting production to countries with favorable trade deals with the U.S. (such as Mexico or Vietnam) is a feasible option.

However, shifting supply chains isn’t a quick fix. The cost of establishing new supplier relationships and managing longer lead times for manufacturing can take months, if not years. Moreover, while Vietnam and Indonesia might be positioned to absorb some of the manufacturing shift from China, their production costs are rising in tandem with demand.

For American consumers, the price increases are only one part of the equation. Retailers will also have to grapple with longer wait times and reduced product availability, especially in categories like apparel, electronics, and household goods. As these larger retail players adjust to higher tariffs, smaller online sellers may see even more pronounced volatility, with a few forced out of business entirely.